In a forecast issued last week during the COP26 summit, Danish Shipping Finance (DSF) predicted that decarbonizing the global shoreside economy will result in a smaller shipping industry – indirectly helping shipping to reduce its emissions. The report echoes the findings of ABS’ global sustainability team, which reported last year that dramatic reduction of the tanker and bulker fleets may help shipping meet its CO2 targets.
“If these predictions prove fairly accurate, emissions from shipping will improve not only with the introduction of new fuels but also owing to a massive reduction in seaborne commodity demand,” DSF predicted.
Fewer ships for big commodities
The biggest changes may be seen in the dry bulk trades, which are centered on coal, iron ore, bauxite and other basic ingredients for heavy industry.
“Cheaper renewable energy is paving the way for . . . the thermal energy needed to make steel, cement and other basic materials to decarbonize towards the middle of the century,” wrote DSF’s analysts. “The impact on seaborne trade from decarbonizing industrial heat could be radical. Basic materials industries may relocate when industrial heat has been decarbonized.”
This raises the prospect that the manufacturing of steel and aluminum could move to where the green power is located. For example, if iron smelting begins to shift to Australia – where there is both abundant iron ore and abundant renewable-electricity potential, the two ingredients needed for “green steel” – then China will not need to import as much iron ore and metallurgical coal from far-flung suppliers. Less shipping of iron ore and met coal would mean less ton-mile demand for bulkers.
Though there is certainly not a stampede of steel manufacturers leaving China for Australia, there may already be an elephant in the room. Australian mining giant Fortescue is already planning to build its own solar and wind power installations in the Pilbara region of Western Australia, alongside a new green steel production facility. And the phenomenon is not restricted to steel.
“The point is that the decarbonization of industrial heat may not only cause onshore assets to be stranded but could also significantly change the demand outlook for vessels currently serving coal fired blast furnaces for steel production, coal or gas fired cement kilns, ethylene plants, chemical plants and aluminium production plants,” the report noted.
In addition to the bulker market, the tanker industry will also feel the effects. Decarbonization of shoreside transport, heating and aviation will mean less need for the transportation of oil, oil products and natural gas – some of the shipping industry’s mainstay cargoes. Even container shipping might not be exempt from these changes.
“When the narrative for the container market shifts from labor costs to emissions, we may begin to see the long awaited push towards regionalization, with highly automated manufacturing powered by renewable energy,” DSF wrote.
The shrinkage of these core shipping sectors could be partially offset by the emergence of new vessel classes, like hydrogen carriers and ammonia carriers, which will be needed to deliver stored renewable energy over long distances. The fleet for the second half of the 21st century is yet to be built, but if DSF is right, it will almost certainly be smaller.
Source : Maritime Executive